- Associated Press - Tuesday, May 5, 2015

PIERRE, S.D. (AP) - With an upgrade from Standard & Poor’s in hand, South Dakota is pursuing new credit ratings from other major agencies to match.

The move this week bumping South Dakota’s issuer credit rating from “AA+” to “AAA” by New York-based S&P; will likely save the state money by letting it borrow at lower interest costs, and similar action from Moody’s Investors Service and Fitch Ratings would compound that effect, said Jason Dilges, the Bureau of Finance and Management commissioner.

What’s unclear for South Dakota, experts say, is exactly how much those savings will be. Another wrinkle is a constitutional provision that largely blocks the state from directly incurring debt, which means it must use methods at “arms-length” from the state, Dilges said.

South Dakota joins 15 other states that have S&P;’s highest rating. Dilges cited the upgrade as a testament to the state’s fiscal strength and said it’s a signal to financial markets that South Dakota debt is a safe bet. Credit ratings give potential bond purchasers a measurement of state performance and credit worthiness.

“We’re not done yet,” Dilges said. “We … will keep on working to get the other two.”

Members of Gov. Dennis Daugaard’s administration have met with ratings agencies, and the governor has pushed for policies to help secure the upgrade. Some of those efforts include timelier financial reporting and longer-term budget and capital spending forecasts.

“When one rating agency takes a rating action, it’s very likely that the other rating agencies might follow,” said Richard Larkin, a senior vice president and director of credit analysis at Herbert J. Sims & Co. Inc., a financial firm.

Dilges said the bump is akin to a credit score improvement for a South Dakota resident: A higher score would mean a lower interest rate on a car or home loan, which would translate to savings over the life of the loan.

For the South Dakota Building Authority, one of several entities that issues bonds in the state, the upgrade will save money, but it’s unclear how much, said executive secretary Don Templeton.

The authority is preparing to offer $11.5 million in bonds to pay for improvements at Custer State Park. But the debt can’t be offered at the “AAA” status because the bonds aren’t backed by the state’s “ultimate guarantee,” Dilges said, so it will be offered at a lower rating.

S&P; credit analyst Sussan Corson said she doesn’t anticipate a change in the state’s rating in the next two years. Corson said North Dakota’s “AAA” outlook is also stable, even if oil prices remain low, as long as the state adjusts its budget accordingly.


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